Kelly Robertson
If you’re in your 20s, life is beautiful. Sure, you may be lacking some money — most of us couldn’t afford it all back in the day — but you have the entire life in front of you. That, however, shouldn’t mean you can spend it all like there is no tomorrow. Quite the contrary, there are a few things you could start doing right now to safeguard your future, putting something on a side every now and then being one of them.
But I’m getting ahead of myself; here are 7 financial tips for people in their 20s. I wish someone has shared them with me some years ago…
1. Take some debt
One way or another, you will carry some debt; the important thing is to differentiate between good and bad debt.
For instance, many students will have a student debt, using which they pay for their studies while at the same time helping them increase their earnings in the long run.
On the opposite side, we have the credit card debt that typically comes with a hefty price tag, especially for young people with little to no credit history.
2. Collect credit card points
Speaking of credit cards, some of them come with rewards, offering either cash-back or points on various, if not all, purchases. We prefer points over cash-back as they provide us with a form of a savings account that can be tapped into once some threshold has been reached. And the sooner you start collecting these points, the more you will accrue over time. Then, when the time comes, you can use them to buy something valuable.
You’ll get best value for your points when you redeem them for travel. For instance, you can convert them into free flights, hotel stays, and other perks. If that doesn’t work for you, well, you can always opt for the cash back option or a gift card. (Related: 5 Things to Know to Maximize the Potential of Credit Card Rewards)
3. Try investing a bit
Most people struggle financially in their youth. Nonetheless, with some discipline, it should be possible to leave something on the side and invest it in the market. Today, there are many low-cost options for this, some of which even come in the form of a mobile app, letting users invest as little as $5 per week. And everyone should be able to leave that much money on a weekly basis, right?
If you agree — and you really should — check out services like Acorns and Robinhood. (Related: 8 Amazing Free Apps to Save, Invest and Manage Your Money While On the Go)
4. Begin saving as soon as you can
When you’re young, you think life is forever. That, unfortunately, is far from the truth and at some point, you will need extra money for retirement. Therefor, it is suggested that you start saving as soon as you can. Even putting $50 per month could do it for a start. Then, once you establish this habit, you can save even more per month.
If you’re lacking discipline for something like this, there is an option to automate savings. I know quite a few people who couldn’t imagine saving without automating it. (Related: 9 Habits to Adopt to Save Money Like a Pro)
5. Create an emergency fund
An emergency fund is different from your savings account. We even suggest that it should be filled first, and used only in emergencies.
For instance, your car might need urgent repair, you may suffer a sudden loss of income, or you need to pay for an unforeseen medical bill. Without the funds in place, most people will use their credit card and begin their downward spiral towards debt. Don’t be one of them. (Related: 7 Frequently Asked Questions About Emergency Funds)
6. Repay those debts
Even before setting up that emergency fund, see if you can clear some of the debts you have. A student loan is not something you can easily repay, but if there are some other debts, see if you can tackle those.
As we have mentioned above, credit card debt is bad. Really bad. If you have it, make sure it’s first on the list. See if you can negotiate with a bank to pay it off. Or if that doesn’t work, try getting a low-rate loan to repay the credit card debt, and later — well — tackle that loan. (Related: 5-Step Process for Getting Out of Debt)
7. Budget everything
Last but not the last, realize how much you’re spending and on what exactly. Put everything on a list, item by item, and see how much that costs you.
First come the recurring bills such utility, internet access and mobile phone bills; then comes the food; and finally everything else you can live without.
Put a number next to each item, and see if you can cut some costs. Perhaps, you could cook more at home, or you could get a lower cost mobile plan. Once you have the list, it will be easier to cut costs. (Related: 5 Ways to Live Within Your Means)
